InsiderOnline Blog: October 2010

Entitlement programs are projected to be a major source of future federal spending (and thus deficits) unless something is done to rein them in. Something should be done to rein them in. But before the nation arrives at a consensus about what should be done on entitlements, it would be helpful if Congress would grab the lower-hanging fruit on the tree of budget cutting options. There’s plenty of that, according to Heritage Foundation budget expert Brian Riedl. His new paper “How to Cut $343 Billion from the Federal Budget” offers 90 suggestions for cutting federal spending in 2012. For example, Head Start doesn’t work, yet the feds will spend about $2 billion on the program in 2012. Most economists agree that government workers, thanks to their powerful unions, earn much more than their private sector counterparts. Freezing federal pay until it can be reformed would save about $3 billion in 2012. And the feds could save $12.5 billion just by halving the amount of money they spend to maintain vacant properties.

Congress has added $2.7 trillion to the national debt in the past two years. Congress can demonstrate it’s serious about fixing the debt problem by implementing the cuts outlined by Riedl.

You’ll never get a bill for government regulations, but you pay all the same in the form of higher prices for a tank of gas, for your health insurance, and for just about everything else you buy. The Heritage Foundation’s new Red Tape Rising report tallies the recent trends in regulatory costs:

According to a report recently released by the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year. …

During the presidency of George W. Bush, which many mistakenly consider as a period of deregulation, the regulatory burden increased by more than $790 billion, according to agency regulatory impact reports. In FY 2009, which spanned the Bush and Obama Administrations, rulemaking proceeded at a nearly unprecedented rate, with the addition of 23 major rules imposing $13 billion in new costs.

But the available evidence indicates that regulatory costs increased last year at a far greater pace. According to data from the Government Accountability Office, federal agencies promulgated 43 rules during the fiscal year ending September 30, 2010, that impose significant burdens on the private sector. The total costs for these rules were estimated by the regulators themselves at some $28 billion, the highest level since at least 1981, the earliest date for which figures are available. Fifteen of the 43 major rules issued last during the fiscal year involved financial regulation. Another five stem from the Patient Protection and Affordable Care Act adopted by Congress in early 2010. Ten others come from the Environmental Protection Agency (EPA), including the first mandatory reporting of “greenhouse gas” emissions and $10.8 billion in new automotive fuel economy standards (adopted jointly with the National Highway Traffic Safety Administration (NHTSA)). Overall, counting the fuel standards, the EPA is responsible for the lion’s share of the reported regulatory costs—some $23.2 billion. …

Measures to reduce regulatory burdens, by contrast, were few and far between in FY 2010. Only five significant rulemakings adopted last year reduced burdens. Of these, cost reductions were quantified for only two, for reported savings of $1.5 billion. This leaves a net increase in the regulatory burden of $26.5 billion. [Internal citations omitted.]

Keep in mind that these are just the compliance costs of regulations as calculated by the government itself, so it’s likely that they are low-balled. What these estimates don’t capture is the value of the new businesses, products, and services that are forgone because the cost of creating them in the first place has been made too high by government regulations.

Nobel Prize winner and stimulus spending booster Paul Krugman is being called out by the libertarians at the Ludwig von Mises Institute. They want Krugman to defend his Keynesian policy prescriptions in a debate with von Mises fellow Robert Murphy. Murphy espouses the Austrian school perspective that sees easy money and stimulus spending as obstacles to economic growth. The von Mises Institute has come up with a clever ploy: They’ve promised to donate $100,000 to the Fresh Food Program of FoodBankNYC.org if Krugman debates Murphy. How could a good liberal deprive a food bank of $100,000?

The group has started a campaign on the Web site The Point to raise the funds. Folks can pledge to the campaign, but they don’t have to pay anything unless the debate actually happens.

If you need a primer on the debate between the Austrians and the Keynesians, see the recent mini-documentaries produced by EconStories.tv (you probably know them as the makers of the Hayek v. Keynes rap video Fear the Boom and Bust).

There appears a good chance that political power will get shuffled a bit on November 2 and that antipathy toward big government is what’s motivating the voters. But do voters’ perceptions of the problem depend on who’s in power? Cato’s Gene Healy writes:

Since 2003, Gallup has periodically asked Americans whether the federal government “poses an immediate threat to the rights and freedoms of ordinary citizens.” The latest results are in, and in just four years Republicans’ and Democrats’ answers “have shifted dramatically.”

In September 2006, 57 percent of Democrats said yes, while only 21 percent of Republicans agreed. Since then, Congress and the White House have gone from red to blue, and the two camps have switched places. “What, me worry?” say all but 21 percent of the Ds today, while 66 percent of the Rs are ready to start provisioning their concrete bunkers.

But government has grown rapidly under both parties over the past decade, which suggests that mindless partisanship explains those poll results. But maybe voters are more ready to hold their representatives accountable this time around. Whatever happens on November 2, we should remember Gerald Ford’s line: “A government big enough to give you everything you want is a government big enough to take from you everything you have.”

Because the concern here obviously is with the U.S current-account deficit – and because a U.S. current-account deficit is simply another name for a U.S. capital-account surplus (that is, a net inflow of capital into the U.S.) – we can translate the opening line of your report to make it more meaningful: “The Obama administration on Friday urged the world’s biggest economies to set a numerical limit on the amounts that their citizens invest in the U.S. economy.”

I await the White House’s explanation for how limitations on investments in the American economy promote Americans’ economic well-being.

The Wall Street Journal offers a detailed look at how Obamacare is contributing to consolidation in the health care industry. Big hospitals are busy creating doctor networks as well as buying up smaller hospitals in anticipation of the creation of Accountable Care Organizations, a topic we mentioned briefly last week. Such moves, the Journal explains, help the smaller operators reduce the uncertainty and the burden of new regulations. Of course, there’s politics, too: the Journal reports:

Accountable care organizations may become little more than a pretext for building up market power and fixing prices. The American Medical Association wants the government to stop insurers from individual contracting in favor of “exclusive dealing arrangements” with ACOs. In effect, the AMA wants a mandatory collective bargaining tool that would convert ACOs into unions.

Some folks believe the Troubled Asset Relief Program might eventually turn a profit. Does that mean it was a good investment? No, explains Nicole Gelinas:

Recall that over the past 22 months, the Federal Reserve has kept its benchmark interest rate at zero percent. Low rates allow large financial firms—including TARP’s wards—to earn what seem like risk-free profits by borrowing at negligible rates and investing the proceeds in instruments (including government bonds) that earn just a little bit more. The Fed’s zero-rate policy has thus been a big factor in the bailed-out firms’ ability to make profits, repay the Treasury, and vindicate TARP.

TARP and other extraordinary government investments in the financial sector, then, give the Fed an extra reason to support the financial industry at all costs. An artificially booming financial industry, boosted by the Fed’s policies, makes the government look especially smart in its TARP investments. But this policy isn’t free. Because large financial firms can borrow so cheaply from the Fed, they—and the Fed itself, through its own asset purchases—have pushed the prices of financial assets, from bonds to stocks, higher than they otherwise would be. Those zero-percent rates can’t last forever. In the meantime, it’s hard for anyone to know what anything is worth, as the prices reflect the government’s policy of supporting the financial markets at all costs rather than the “real” values of companies and investments. Investors can’t make decisions based on companies’ business prospects, then, but must wonder instead how long Washington will sustain its overwhelming support of financial firms and housing prices—and what will happen when that support ceases.

The country mines far more coal than any other nation—almost three times as much annually as the second-place United States. There are no signs of a slowdown: Chinese coal production has tripled in the last 10 years alone, to roughly 3 billion tons per year. China’s reliance on coal-fired power plants means that the country suffers from terribly polluted skies. Canadian scientists using NASA data have concluded that the air in eastern China is the world’s most polluted, with the highest concentration of particulates. The European Union has also declared that only 1 percent of Chinese city dwellers enjoy safe air quality, and health experts blame air pollution for China’s high rates of cancer and a host of other maladies. With China continuing to ramp up its coal production, the forecast for the country’s skies remains smoggy for decades to come.

Hewitt Associates recently projected that health insurance premiums will rise 8.8 percent in 2011. That follows a 6.9 percent in increase in 2010. One reason Obamacare may be failing to make health insurance more affordable is that the law does nothing to address one of the major drivers of rising health care costs: government itself.

Every year, the Council on Affordable Health Insurance (CAHI) tallies up the costs of state mandates on health insurance plans. This year’s report by CAHI, which came out Wednesday, finds that the states currently impose 2,156 different benefit mandates on health insurance plans, up from 2,133 last year. The states require health insurance plans to cover everything from maternity care (is getting pregnant really an insurable risk?) to acupuncture, massage therapy, and oriental medicine. These services may be worthwhile to many people, but why should consumers who don’t want them be forced to make a choice between paying for them or not having any health insurance at all? CAHI estimates that most of these mandates increase health insurance costs by less than 1 percent, but when many states have 40 or 50 or even 60 benefit mandates, the cumulative cost of the mandates can easily price people out of the market altogether. Idaho has the fewest benefit mandates with 13, while Rhode Island has the most with 69 benefit mandates.

Obamacare goes in the opposite direction of reforming this mess, requiring everyone to purchase health insurance and leaving it to the Department of Health and Human Services to determine what level of coverage will satisfy the mandate. For more on this problem see Kathryn Nix’s “Government Intervention in Health Care Increases Costs” at The Foundry.

On Wednesday, Fairfax County, Va., approved a lease extension for the Islamic Saudi Academy, an elementary school run by the Saudi government. The extension allows the academy to remain in its current facilities, about 15 miles from Washington, D.C., until June 2012. Nina Shea, director of the Hudson Institute’s Center for Religious Freedom, offered testimony reviewing concerns about extremist teachings in the ISA’s curriculum:

Until the 2008-09 academic year, ISA’s religious textbooks used Saudi government textbooks that teach that it is permissible, or even required, to kill those who leave Islam (which includes the majority of Muslims who reject Saudi Wahhabi doctrine), polytheists (which includes Shiite Muslims), Jews, homosexuals and others, and that militant jihad to spread the faith is a sacred duty. The State Department, the US Commission on International Religious Freedom, a top counter-terrorism official at the Treasury Department, Undersecretary Stuart Levey, and Congressman Frank Wolf have all recognized the link between such extremist education and violence and terror. Even a Saudi government panel concluded that the Saudi Ministry of Education’s Islamic curriculum promotes violence. In fact, one of the academy’s valedictorians, American born Ahmed Abu Ali, was convicted of giving material support to al Qaeda and conspiring to assassinate Pres. George W. Bush and in 2009 was sentenced to life imprisonment.

For the school year beginning in fall 2008, after my reports and those of the Gulf Institute, USCIRF, the Washington Post, Slate magazine and others demonstrated the extremist content of its Islamic Studies textbooks, ISA began using Saudi textbooks in its Islamic studies curriculum that were heavily redacted, as well as other material that is not publicly known. (Regarding the textbooks used within Saudi Arabia itself, the State Department itself, in its 2010 annual report on human rights, concluded, with diplomatic understatement, that Saudi Ministry of Education textbooks continued to contain “some overtly intolerant statements” against various religious groups, that they “provided justification for violence against non-Muslims,” and that reforms remained “incomplete.”)

We wish we could celebrate the deletions in the texts at ISA that we helped catalyze, but we are not persuaded that the problem is solved. The books have simply removed the previous lessons, but they have put no other written content in their place. The texts do not offer an alternative, they are simply silent, they contain no significant discussion of jihad and make few references to the religious “other.” The silence is deafening. It raises the question – a question ISA has yet to satisfactorily answer – of what supplemental material the academy is using.

“The total amount we all owe state and local government workers for retirement benefits is $3 trillion. To finance that, states and cities must spend $64 billion annually. And the cost is still growing.” So reports the short video below, which is based on Steve Malanga’s new book Shakedown: The Continuing Conspiracy Against the American Taxpayer.

Gibbs is arguing that groups that engage in public debate about elections should be legally required to tell us who they get their money from, and if they don’t it must be evidence of something sinister.

I wonder if Gibbs thinks the NAACP was such a sinister group in the 1950s when it fought the State of Alabama over its membership lists. In a landmark decision the Supreme Court unanimously concluded that the state’s attempt to compel the NAACP to produce the lists violated the right to freedom of association. It said “Inviolability of privacy in group association may in many circumstances be indispensable to preservation of freedom of association, particularly where a group espouses dissident beliefs.”

The NAACP’s cause of racial equality was, of course, a “dissident belief” in 1950s Alabama. Many other beliefs are often “dissident,” such as opposition to the invasion of Afghanistan after the 9/11 attacks, opposition to the minimum wage, and defending the right to burn the American flag. Beliefs opposed to each other can even be dissident at the same time, such as groups that are for/against same sex marriage. Perhaps the most obvious example of a group that might fear retribution is one that speaks out for or against candidates for office, since candidates can often make life miserable for those who opposed them during the election. Groups that advocate all of these views have an interest in protecting the anonymity of their members and donors. This reflects a long tradition of protections of anonymous speech that extends back to, and before, the anonymously published Federalist Papers.

Have you heard the latest legal argument trotted out by the defenders of Obamacare’s individual mandate?

The Constitutional question that’s been presented in about 20 lawsuits is whether the Commerce Clause allows Congress to regulate behavior that is not in any way commercial at all. People who have chosen not to buy health insurance would not seem to be engaged in commerce, and thus would seem to be beyond the reach of Congress’s power to regulate commerce. It’s difficult to justify the contrary position, because that would amount to saying that there are no real constitutional limits to Congress’s powers. If it can regulate inactivity, then Congress can regulate anything.

But here’s what the defenders of the law have come up with: Earlier this month, U.S. District Judge George Caram Steeh dismissed a lawsuit against the individual mandate filed by the ThomasMoreLawCenter. He ruled:

Far from ‘inactivity,’ by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance. … These decisions, viewed in the aggregate, have clear and direct impacts on health care providers, taxpayers, and the insured population who ultimately pay for the care provided to those who go without insurance.

On Monday, this same argument was made by Deputy Assistant Attorney General Ian Gershegorn in a summary judgment hearing in the case of Virginia v. Sebelius. The problem with this argument, as Jacob Sullum points out, is that the “logic is easily adaptable”:

People who abstain from purchasing a car are making an economic decision to use other modes of transportation, and that choice has an impact on the U.S. automobile industry, which the federal government is committed to saving. People who do not eat vegetables are making an economic decision to consume other foods, and that choice affects the market for health care services as well as interstate commerce in broccoli.

This latest trope, however clever, thus points squarely at the central constitutional question: If not buying a product is commercial activity that can be regulated by Congress, then what can’t Congress regulate?

It’s been over two years since the Supreme Court struck down the District of Columbia’s gun control laws as a violation of the Second Amendment, and liberal commentators predicted a wave of gun violence would engulf the city. Those predictions were issued despite the fact that D.C.’s gun control laws had already been shown to lead to higher murder rates. As John Lott explained it:

The ban went into effect in early 1977, but since it started there is only one year (1985) when D.C.'s murder rate fell below what it was in 1976. But the murder rate also rose dramatically relative to other cities. In the 29 years we have data after the ban, D.C.'s murder rate ranked first or second among the largest 50 cities for 15 years. In another four years, it ranked fourth.

And the data since 2008 are also confounding liberal predictions. Lott has now pulled together a table comparing crime rates for the first seven months of each year since 2007. Since 2008, homicides have dropped 35.5 percent, total violent crime by 9.5 percent, and assaults with guns by 24.1 percent. It seems that when criminals fear others might have guns, too, they think twice.

Twenty different lawsuits, involving 21 different states, have been filed against Obamacare. You can keep track of them all by checking in regularly with HealthCareLawsuits.org, a new Web site produced by the Independent Women’s Forum. The site provides the latest news, key documents, and a calendar of important upcoming dates for each case. There’s also a timeline of events, a blog tracking commentary, and a map showing the legal action in each state.

Remember the 1990s, when profit-seeking Health Maintenance Organizations were the villains for denying patients care? Obamacare will be the same system with a different acronym, predicts Scott Gottlieb. Writing in the New York Post, Gottlieb, a fellow at the American Enterprise Institute, explains that Obamacare will set up Accountable Care Organizations (ACO):

… an ACO is supposed to take “accountability” for local Medicare patients, who in turn get most care from providers working inside the ACO’s network. To encourage efficiency and cost-cutting, an ACO can share in the savings it achieves from more closely managing its assigned pool of patients. The idea is to give doctors a financial incentive to better coordinate care and reduce their use of costly medical services.

Physicians who want to maintain what they’re paid by Medicare will have to join the ACOs. And that’s not the only provision of the law driving doctors into networks. Because both the prices and the features of health insurance plans will be defined largely by regulation, health insurers who do the best job of limiting the use of medical services by patients will see the most profit. That means networks, explains Gottlieb:

The only way to tightly control the use of medical services is to exert more leverage over the doctors who order the tests and treatments. That means health plans will need to maintain tight networks of providers to exert more control over doctors—or else own the physicians outright. So expect to see health plans doing their own “vertical integration”—buying out medical practices, just like hospitals are doing.

According to a recent survey of health executives, 74 percent said their hospitals or health systems plan to employ more physicians over the next 3 years, and 61 percent plan to acquire medical groups. The doctor-recruitment firm Merritt Hawkins said that 45 percent of physician job searches last year were for direct employment of a doctor by a hospital, up from 23 percent in 2005.

A doctor’s other option, of course, is to quit medicine altogether. A recent survey by Association of American Medical Colleges found that the projected doctor shortage has increased by 50 percent following passage of Obamacare. Last year, 45 percent of doctors told an Investor’s Business Daily poll “that they would consider leaving their practices or taking early retirement if the Democrats’ version of reform were to become law.”

There are few pastimes of more interest to the main stream media and political establishment than analyzing the psychological make up of Tea Partiers. In spite of all their huge yet orderly and passionate yet polite gatherings, Tea Partiers often get a bad wrap. To denizens of the political realm, they seem such an anomaly—not single issue, not defending some federal program that inures to their benefit, not foot soldiers of a single charismatic leader. The profile offered by the media and the left is predictable and less than flattering—mean-spirited, racist … throw-backs. Obviously, the ad homonym attacks writ large are intended to discredit, discourage and derail Tea Parties as a growing political force. An extra hurdle of assembled accusations is thrown before Tea Party leaders and followers as they seek to interject themselves into the political process and their foes anxiously await for them to fail to clear it—for any misstep, any inarticulate utterance, any opening to pounce. When Tea Partiers disappoint them and a story about their activities somehow manages to make it past the editorial spike, it is typically reported according to the predetermined script—a meandering rant to a sparse and insignificant audience.

You may have heard recently that Tea Partiers in Virginia choose NJ Governor Chris Christy in a presidential straw poll. Little else, however, managed to pierce the media curtain of the major networks although FOX News provided coverage of the large political gathering in Richmond that attracted national names. For some reason, the national networks passed on this opportunity to find out on a large scale what Tea Partiers, like the event’s lead organizer, Jamie Radtke, were really like.

We first met Jamie Radtke months before at a small tea party gathering. Before 50 or so compatriots squeezed into a room at Chinese Buffet off the interstate between Richmond and Williamsburg, Radtke spoke on a number of issues that escape us now. What was memorable was that she clearly had the confidence of her convictions. Chatting afterwards, she spoke of nascent plans to hold a convention at which all of Virginia’s Tea Party leaders and foot soldiers could gather. She and her allies were planning on renting the RichmondConvention Center and selling tickets and soliciting sponsorships to pay for it. To do so they would have to attract big names but had none committed. They had never done anything of the sort before and it was just six months away. After the official meeting drew to a close, Radtke and her allies set up shop in one of the empty restaurant booths to review the Convention Center contract.

By October 8 it was show time. The affiliates of the Virginia Tea Party Patriots, over 30 groups in all, had put together a two-day schedule with dozens of issues-oriented panels ranging from discussions of how to start your own tea party to the threats posed by Federal entitlements and the pending Obama tax hikes on Virginians (See The Heritage Foundation’s flyer on Job Losses in Virginia. Note: Heritage will shortly have flyers like this one for other states as well.) They had secured a long list of notable figures—like Governor Bob McDonnell, Attorney General Ken Cuccinelli, former Senator George Allen, Dick Morris, and Herman Cain—to speak before the general sessions. They had printed glossy programs and attendance credentials, had put in place a teams of volunteers and contractors to manage everything from complicated light and sound systems and stage timing to media relations and security and they had provided efficient systems for online and on-sight registration. They had put the conference together with the confidence that they were not alone and the like-minded would come. And they did. Some 2,800 of them, many taking off a day from work and paying for the chance gather with compatriots and to enrich their understanding on everything from the general principles underlying the Constitution to the constitutional questions raised by Obamacare. As a whole, they were remarkably informed, energetic, generally optimistic, and patriotic.

These volunteers kept a huge and complicated event running within minutes of schedule over the course of two days but by the time the first day concluded they were ready for a break and had arranged an evening of entertainment in the adjoining Marriot Hotel. There, convention attendees wandered from one themed room to another. The Don’t Tread on Me Saloon featured games of Texas Hold ’em. In the Freedom Fever Dance Hall, the Atlanta Dance Band Mo’ Sol struck up everything from Dave Brubeck’s Take Five to Earth Wind and Fire favorites. Those who ventured into the Liberty Lover’s Lounge & Martini Bar could hear a Dean Martin impersonator crooning classics and sip drinks like the green capitalist pig. In short, they had fun before another day packed with panels and speakers.

Kristin Cooper, one of the organizers, was exuberant though frustrated by the manner in which mainstream media portrayed them: “This is who we are,” she told us during the evening’s celebration.

Colleen Owens had the daunting task of dealing with all the personalities that came with having dozens of political figures and public policy experts speaking over the course of two days. She was upbeat and no-nonsense about the job that had her perpetually traveling from venue to venue in the sprawling convention center. It was going great, she said, but if somebody wasn’t happy, then her view was: “Fire me. We’re all volunteers.”

Near the close, the crowd of Tea Partiers heard from Rep. Steve King, George Allen, Ken Cuccenelli who brought them to their feet when he said: “I don’t think there’d be a Tea Party if the Republican Party had been the party of limited government in the first half of this decade.” The results of the straw poll show that this group was thinking about issues, not who has the best haircut. New Jersey Gov. Chris Christy, who in his short time in office has put together an impressive record of cutting government and standing up to the unions, beat a field that included Ron Paul, Lou Dobbs, and Sarah Palin.

For the Tea Party groups this event, by every measure save one, was a resounding success. You, however, clearly didn’t hear anything about it on network news. But what could you expect? These Tea Partiers have minds of their own and don’t follow the assigned script.

This post was written by Robert Gordon, Senior Advisor for Strategic Outreach at The Heritage Foundation.

Is it true that Tea Partiers are racist? Somebody actually decided look for some evidence. Her name is Emily Ekins. At the 9/12 Taxpayer March on Washington, Ekins spent hours photographing every sign she saw. The Washington Post has an article detailing her findings:

Ekins photographed about 250 signs, and more than half of those she saw reflected a “limited government ethos,” she found – touching on such topics as the role of government, liberty, taxes, spending, deficit and concern about socialism. Examples ranged from the simple message “$top the $pending” scrawled in black-marker block letters to more elaborate drawings of bar charts, stop signs and one poster with the slogan “Socialism is Legal Theft” and a stick-figure socialist pointing a gun at the head of a taxpayer.

There were uglier messages, too – including “Obama Bin Lyin’ – Impeach Now” and “Somewhere in Kenya a Village is Missing its Idiot.” But Ekins’s analysis showed that only about a quarter of all signs reflected direct anger with Obama. Only 5 percent of the total mentioned the president’s race or religion, and slightly more than 1 percent questioned his American citizenship.

The big news on Obamacare this week is that the lawsuit filed by 16 state attorneys general, four governors, two private citizens and the National Federation of Independent Business can go forward. In particular, the United States District Court for the Northern District of Florida rejected the Obama administration’s motion to dismiss the central claim of the lawsuit—that Obamacare’s individual mandate is unconstitutional. Judge Roger Vinson, writing for the court stated: “this is not even a close call. … The power that the individual mandate seeks to harness is simply without prior precedent.”

Judge Vinson’s opinion also contained a few choice words regarding the administration’s claim that the mandate is really just a tax and that Congress has the power to impose such a tax:

Because by far the most publicized and controversial part of the Act was the individual mandate and penalty, it would no doubt have been even more difficult to pass the penalty as a tax. Not only are taxes always unpopular, but to do so at that time would have arguably violated pledges by politicians (including the President) to not raise taxes, which could have made it that much more difficult to secure the necessary votes for passage. … Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an “Alice-in-Wonderland” tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check.

The ruling means that those defending Obamacare will now have to argue that the Constitution’s Commerce Clause allows Congress to regulate inactivity—which is another way of saying that the Constitution allows Congress to regulate anything. We certainly hope they’re wrong. The court will hear the suit on December 16.

Some good news on the fighting-the-tyranny-of-local-government front: Farmers in Lake Elmo, Minn., can once again sell produce grown outside the city limits. The city had passed an ordinance in 2008 forbidding farms in LakeElmo from selling produce that they had not grown in LakeElmo. Farmers who violated the ordinance faced 90 days in jail and thousands of dollars in fines.

The city repealed the law in response to a ruling by a federal judge that the law likely violated the U.S. constitution because it discriminated against interstate commerce. The Institute for Justice had filed suit against LakeElmo on behalf of farmers Keith Bergman and Dick Bergman who sold pumpkins and Christmas trees from out of state at their farm in LakeElmo. Magistrate Judge Franklin L. Noel stated that the law “squelche[d] competition … altogether, leaving no room for investment from outside,” and would likely have “obliterate[ed] … the LakeElmo markets in pumpkins and Christmas trees. … In fact, Plaintiffs have shown that the markets will be wiped out.”

By most accounts, the film Waiting for Superman does an excellent job of revealing how and why our public schools are failing. “Waiting for Superman isn’t just a well-made, persuasive documentary,” says Robert W. Butler in the Kansas City Star. “It’s a turning point. At least you come out of the theater hoping so.” And at the Huffington Post, Michael Jones writes of the film: “It’s equal parts a tragedy, a desperate call to action, and an indictment of an expensive dysfunctional system that seems to exist to fund pensions and to protect jobs, not to educate poor powerless kids. Mostly Waiting for Superman is sad. So sad, as we watch innocents used by cynics with agendas far beyond the three ‘R’s.”

While the film identifies the intransigence of teachers unions as the main culprit and highlights the promise of charter schools, it has little to say about school choice. In fact, the Waiting for Superman Web site provides a list of actions that folks can take to help improve education, but the only reform mentioned there is getting the governors to implement the Common Core standards. (Caveat: Statesshould develop world class education standards, not the federal government. See Lindsey Burke and Jennifer Marshall’s paper “Why National Standards Won’t Fix American Education: Misalignment of Power and Incentives.”)

We hear that one reason for a lackluster recovery is that both banks and nonfinancial firms are hoarding their cash instead of investing it. Here are some graphs of Federal Reserve data showing that’s the case:

And:

But why would businesses sit on the sidelines instead of putting their money to work earning a return? One reason may be that businesses face a lot more uncertainty that usual.

How much will it cost to hire a new worker? Depends on how Obamacare will work, and many of those details are yet to be determined through regulations implemented by the Department of Health and Human Services. What will consumer sentiment be in the next six months? That depends on whether Congress allows taxes to rise as they are currently scheduled to do on January 1, 2011. What will a firm’s energy costs be? That depends on whether the EPA goes ahead with plans to regulate carbon dioxide under the Clean Air Act.

And so on. In short, the federal government is responsible for a lot of uncertainty that businesses are facing these days, and it’s not hard to see why they might want to have extra cash on hand. Here’s another picture that makes the point:

When World War II ended and the U.S. government turned to the task of demobilization, the Keynesians warned that cutting government spending rapidly would bring massive unemployment. They were wrong, writes Arnold Kling:

Government spending plummeted by nearly two-thirds between 1945 and 1947, from $93 billion to $36.3 billion in nominal terms. If we used the “multiplier” of 1.5 for government spending that is favored by Obama administration economists, that $63.7 billion plunge should have caused GDP to fall by $95 billion, a 40 percent economic decline. In reality, GDP increased almost 10 percent during that period, from $223 billion in 1945 to $244.1 billion in 1947. This is a rare precedent of a large drop in government spending, so its economic consequences are important to understand.

The end of World War II thrust more than 10 million demobilized servicemen back into the labor market, but without the catastrophic consequences Keynesians feared. Close to 1 million took advantage of the GI bill to attend college. In addition, some of the increase in the male work force was offset by a decline in female labor force participation from World War II levels. But if Rosie the Riveter became a housewife, many of her friends continued to work outside the home. Over all, from 1945 to 1947 the civilian labor force increased by 7 million, or 12 percent. The vast majority found work, as civilian employment rose by 5 million, an increase of 9 percent.

Want more history of successful government austerity programs? Check out Maurice McTigue’s account of New Zealand’s experience in the 1980s and the David Henderson’s account of Canada’s reforms after 1994, in the November 2010 issue of Reason.

At least 72 aides on both sides of the aisle traded shares of companies that their bosses help oversee, according to a Wall Street Journal analysis of more than 3,000 disclosure forms covering trading activity by Capitol Hill staffers for 2008 and 2009.

The Journal analysis showed that an aide to a Republican member of the Senate Banking Committee bought Bank of America Corp. stock before results of last year's government stress tests eased investor concerns about the health of the banking industry. A top aide to the House Speaker profited by trading shares of Freddie Mac and Fannie Mae in a brokerage account with her husband two days before the government authorized emergency funding for the companies. Another aide to Republican lawmakers interested in energy issues, among other things, profited by trading in several renewable-energy firms.

Ahhh, karma: Last week, the American Postal Workers Union (AWPU) had to extend its elections for national officers—because thousands of ballots got lost in the mail. Hey, mistakes happen, especially when your slogan isn’t “relax, it’s the Postal Service.”

But, as Cato’s Tad DeHaven notes at the Daily Caller, these are workers who, thanks to their union and to the collective bargaining rules under which the Post Office must operate, receive $79,000 in total compensation per worker, much higher than their counterparts in the private sector.

DeHaven further points out:

Collective bargaining agreements also make it difficult for the USPS to hire part-time workers, which could generate substantial savings. Hiring workers who can work less than 8-hour shifts would give managers needed flexibility to address seasonal and weekly fluctuations in workload. … While only 13 percent of the USPS’s workforce is part-time, the figures for UPS and FedEx are a respective 53 and 40 percent. Germany’s Deutsche Post, which is privatized, employs a workforce that is 40 percent part-time.

The Postal Service, already with a $15 billion line of credit at the U.S. Treasury, is expected to run out of cash by year’s end, but that hasn’t stopped the AWPU from asking for a pay increase in its latest negotiations with the Postal Service. Worry, taxpayers.

Congratulations to Mario Vargas Llosa on winning the Nobel Prize in Literature this week. The SwedishAcademy recognized Vargas Llosa “for his cartography of structures of power and his trenchant images of the individual’s resistance, revolt and defeat.” It’s a description that hints at another distinguishing characteristic of Vargas Llosa: Unlike many recent winners of the prize (Harold Pinter, Doris Lessing) Vargas Llosa is not politically of the Left. He started out there, of course, as an admirer of Fidel Castro, but he became disenchanted with the brutality of Castro’s dictatorship and drifted rightward. Vargas Llosa in fact ran for President of Peru in 1990 on a neoliberal platform of budget cuts and free markets. He has been variously described as a free-market conservative, neoliberal, classical liberal, and liberal. He explained his views at the American Enterprise Institute in 2005:

… the liberal I aspire to be considers freedom a core value. Thanks to this freedom, humanity has been able to journey from the primitive cave to the stars and the information revolution, to progress from forms of collectivist and despotic association to representative democracy. The foundations of liberty are private property and the rule of law; this system guarantees the fewest possible forms of injustice, produces the greatest material and cultural progress, most effectively stems violence and provides the greatest respect for human rights. According to this concept of liberalism, freedom is a single, unified concept. Political and economic liberties are as inseparable as the two sides of a medal.

We haven’t read all his works, but we especially enjoyed Death in the Andes.

If you are a National Review reader who is concerned that giving to your alma mater doesn’t reflect your values, then check out the new National Review Collegiate Giving Clubs. Here’s the description of the project from its homepage:

NATIONAL REVIEW Collegiate Giving Clubs (NR Giving Clubs) is a special service designed for NATIONAL REVIEW readers who donate to colleges and universities and want to maximize the impact of their giving.

Formal education is the introduction to a life of learning and the foundation of American citizenship. It is vital to the preservation of our liberty as individuals and as a culture. Higher education plays an important role in American life, but we frequently hear about the reluctance of colleges and universities to sustain our values. At many schools there is too little support for teaching and courses that reflect the positive aspects of American history, the importance of free markets to wealth creation and the elimination of poverty, and the significance of Judeo-Christian and Western achievements. The NATIONAL REVIEW Collegiate Giving Clubs program is designed to help alumni and other donors direct their gifts in ways that support outstanding faculty and students interested in an education that will prepare the next generation for the challenges it will face as citizens and leaders.

Oh, a storm is threat’ningMy very life todayIf I don’t get some shelterOh yeah, I’m gonna fade away

Every week, we’re finding out more and more about how Obamacare will work, and the news has been pretty uniformly bad. Here’s a roundup of items you might have missed from the past week or so:

• Obamacare’s requirements on medical loss ratios (the percentage of premiums spent on health care for those covered by the plans) are proving to be thorny politics for the Department of Health and Human Services. McDonalds told the department that it would probably drop the limited coverage it offered to 30,000 of its employees because its plans could not meet the ratios prescribed by the law unless it received a waiver from those requirements. McDonalds had offered its lower-income workers options that had upper limits on expenditures as a way to make them affordable. But because of high turnover among lower-wage retail workers, the plans administrative expenses are typically higher relative to other plans. [Wall Street Journal] A few days later, the Department of Health and Human Services did indeed grant waivers that allow McDonalds workers and many others—1 million in all­­—to continue receiving the health insurance they already have. [Bloomberg] While it is a good thing that 1 million workers will be able to keep the health insurance options they currently have, why should they need the permission of unelected bureaucrats? If we really wanted to protect the health care options of these workers, why not repeal that provision entirely? Another problem, as the American Spectator’s Philip Klein explains, is that “[t]hose companies with the best access and lobbyists are in the best position to be granted a waiver. Bureaucrats can choose to apply a different set of rules to different businesses, and in some cases those rules can determine whether a given business survives. Thus, the waivers themselves are another example of the arbitrary nature of government power.” And Conn Carroll points out at The Foundry that this story reveals but one of the many ways that the Obamacare law puts the health care options of millions of Americans into the hands of government bureaucrats.

• Obamacare will dramatically worsen an expected doctor shortage. The Association of American Medical College’s Center for Workforce Studies predicts that by 2015, the nation will be facing a doctor shortage of 63,000. Before Obamacare, the shortage had been predicted to be 39,000. In 10 years, doctor deficit will rise to 91,000, and the wait for a routine visit to the doctor could be three our four months. Under Obamacare, compensation for providers is expected to be ratcheted down significantly. Many doctors have also cited an increase in regulations as a reason to leave the profession. [Investor’s Business Daily, Reuters]

• The company 3M has decided to drop the health insurance plan it had offered its employees. Instead the company will set up health reimbursement accounts that its employees can use either to purchase a Medicare plan or, if not yet 65, to purchase a plan from the new health insurance exchanges that Obamacare will set up. [The Foundry, Wall Street Journal] As explained by Doug Holtz-Eakin and Cameron Smith, the extent to which Obamacare incentivizes such shifts has been greatly underestimated by the Congressional Budget Office, which means that the ultimate bill to the taxpayer will be much bigger than expected.

• The Principal Financial Group, whose primary business is asset management, has decided to stop selling health insurance. The company’s insurance business was focused on plans for small businesses. The company decided that the investments it would have needed to make to comply with Obamacare would have been too expensive. Suggesting that the new law may lead to greater market concentration and less competition, one Principal executive explained: “Now scale really matters ... We don’t have a significant concentration in any one market.” [New York Times]

Last night, we had a chance to catch a screening of Bjorn Lomborg’s new documentary, Cool It. The film officially releases November 12, and everyone should make an effort to see it because Lomborg has an important message. Lomborg, by the way, is not a part of what some may refer to as the “global warming denier” camp. But he does have an issue with the predominant model for attacking global warming. In short, he doesn’t think it makes sense to worry about cutting carbon emissions now, because we really don’t have the technology to do it without impoverishing ourselves. And when so many people around the world are still living in poverty, can we really expect any kind of global compact to emerge? Indeed, governments have been pledging to reduce carbon emissions for nearly two decades now. But they haven’t done it, and the longer they continue to fail at it, the more grandiose the promises of future cuts get.

Lomborg’s common sense message is that instead of imposing a cap-and-trade system and subsidizing/mandating the use of alternative energies, we should focus on research and development of better alternatives—alternatives to the current crop of expensive alternative energies (e.g., wind and solar). Cool It delves into the some of the promising approaches that are not quite ready but could eventually be the next big energy source given sufficient R&D funding. Remember, we only need one of those ideas to work. The key point is that we don’t know which one of those ideas will work and so the government shouldn’t be involved in picking winners and losers. Lomborg has a good analogy that reveals the folly of the current approach: Imagine that, in order to phase out the use of typewriters, the government had imposed a cap and a tax on the use of typewriters before the development of personal computers. Sure it might have spurred the development of personal computers a little bit, but in the meantime a lot of money would have been wasted by people having to fill their houses with room-sized vacuum-tube computers.

You can be sued for hiring an epileptic as a driver if he causes a crash; but, under the Americans with Disabilities Act, you can also be sued for not hiring an epileptic as a driver. As Walter Olson reports at Overlawyered, McDonalds was recently sued for the former; in 1997, a jury told Ryder Systems, Inc. to pay $5.5 million for sacrificing equality on the altar of public safety.

How big, really, is government? Traditional measures point to the amount of money government spends as indicating its true size. Others add in estimates of the economic costs of government regulations. Edward Kleinbard, writing in Cato’s Regulation magazine, says you can’t really appreciate the true scope of government unless you count tax expenditures as well.

That argument may strike some small-government conservatives and libertarians as wrongheaded, if not offensive. After all, a tax expenditure is essentially a targeted tax cut. And if the government is taking less money out of the private sector, how can that be counted as part of the size of government?

But, by definition, a tax expenditure leaves more money in a taxpayer’s hands only if the taxpayer does certain things that the government wants done. Imagine, says Kleinbard, if Congress created a tax credit program for providing weapons to the Pentagon and then reduced on-budget defense spending by exactly the value of the credits provided. Would anybody pretend that the scope of government was really reduced by such legislation?

Kleinbard points out that tax expenditures have grown rapidly since 1974. As calculated by the Congressional Research Service, they amounted to $1.2 trillion in 2008—more than double non-defense discretionary spending for that year. (Note, by the way, that this figure does not include tax subsidies—actual spending programs in which the IRS sends checks back to taxpayers because the tax credit they receive exceeds the amount of taxes they owe.) If two-thirds of government spending is off the books in the form of tax credits, then how can policymakers, let alone citizens, have meaningful debates about the priorities of their government?

Indeed, Kleinbard argues, that tax expenditures have created a kind-of Congress within a Congress, as the tax-writing committees have assumed more control over setting policy. That set-up undermines the ability of the other committees to track the issues for which they are supposed to be responsible: “They do not track the efficacy of the tax programs, they do not necessarily coordinate that spending with their own explicitly appropriated spending, and they have lost the ability to argue that their priorities should be preferred over those reflected in the tax legislation.”

It also creates multiple avenues for special interests to lobby for what they want. If the appropriators don’t give you the money, just ask the tax writing committees for a tax credit.

The National D-Day Memorial is no longer adorned with a bust of Soviet dictator Joseph Stalin. The folks running the show there decided to take it down on Tuesday. That would seem fitting, since Stalin was a murderous thug whose initial alliance with Adolf Hitler helped make the Allied invasion at Normandy necessary.

Nope. The D-Day Memorial has a plan to relocate Stalin’s bust along with those of Chinese leader Chiang Kai-shek, U.S. President Franklin Roosevelt, and British Prime Minister Winston Churchill. The Foundation’s idea, apparently, is that grouping the busts together in a different location at the Memorial will help tell the political story of World War II better. Lee Edwards, chairman of the Victims of Communism Memorial Foundation, had this to say:

This plan is even worse than the original placement of the Stalin statue because grouping Stalin with FDR, Churchill and other allied leaders would give the Soviet dictator a moral as well as a political equivalence he does not deserve.

The D-Day Memorial Foundation insisted that its decision was not “a reaction to special interests” that had expressed their opposition, thereby insulting the American Legion which had urged the removal of the Stalin bust. As for the Victims of Communism Memorial Foundation, we admit proudly that we have a special interest in educating people about the myriad crimes and victims of communism, millions of whom died as a result of Joseph Stalin’s tyranny.